All About the Money?
Banks and finance institutes are trying to shift towards green loans, mostly pressured by government authorities. Triggered by an example recently shared by our partner at Vives, we held a short discussion and inventory amongst a number of Stronghouse partners to collect research updates, contemporary developments and possible inspiration in terms of financing sustainable energy renovations in their region.
Timing
Timing is an important factor if Europe is to gain and retain the required momentum for the much mentioned energy renovation wave. There is a recent trend amongst banks to promote new renovation possibilities for property buyers when negotiating mortgage loans. Mortgages can be adapted to allow for the financing of energy efficiency improvements.
When property ownership is being transferred, banks look more frequently at the Energy Performance Certificate (EPC) to gain insight into the renovation requirements, costs and return on investment. If the potential buyer is also faced with a thorough energy renovation, some banks now offer a rent-free, energy credit loan, designed as an incentive for new owners to retrofit their homes. This initiative signals a great leap forward.
Governments and the building sector also see the moment of property transfer as a lever for more energy renovations as it is more difficult to motivate homeowners to retrofit once they have settled.
There are more advantages to timing things right:
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Systematic renovation of every existing house within 5 years after buying would result in 90% of houses reaching the required energy status by 2050.
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There are no surprises for the buyers; every transfer of existing property becomes an energy renovation project
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The property values are more stable
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Home comfort is improved and contributes to CO2 reductions.
Loans & gains
Some regional and local Energy Cooperatives offer financing on the basis of loan to value and the potential savings. This could be another accelerator for widescale retrofitting. For example, an investment of 25,000 euros on energy-saving measures could result in a saving of 100 euros per month on energy bills and be paid off within 20 years. Besides the sustainability gains, the value of renovated homes increases, forming an indirect gain. This is a complex subject with many factors – location, measures taken, type and original condition of the house.
Research shows that consumers are willing to pay more for an energy efficient house – valuing the economic advantages and improved comfort. Their motivation is not necessarily from an environmental viewpoint – which is one reason the ‘value’ of an energy label remains limited.
EPC, green finance & banks
General consensus amongst the Stronghouse partners is that there is more needed than an Energy Performance Certificate (EPC) to understand home energy efficiency. Clearly, banks and finance institutes can be key actors in accelerating the process through capacity building.
Some highlights exchanged by the partners on this topic:
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IGEMO suggests the existing extremes on the property market could push mainly young buyers towards houses with the lowest EPC, and possible green loans for deep renovation. A large low-income group and many older homeowners lack the resources to invest.
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The blockchain solution currently being developed by Spring and the University of Gothenburg provides a transparent ledger system for banks facilitating investments in Green Bonds. These bonds can be used to finance homeowner renovations with low interest loans.
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The research by Robert Gordon University of building typologies in the UK and available online tools for homeowners looking at retrofitting solutions has revealed different tools mainly focussed on financial incentives.
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ProjectZero has just completed a comprehensive information package for all 11 banks in their region (including a newsletter, training sessions and a ready- to-use presentation).
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The Orkney Islands Council focus in Stronghouse is more on energy communities, but they are also cross-linking with the Green Finance Institute regarding work on demand aggregation and building renovation passports.
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Vives is currently talking to a large Belgian bank and investigating potential collaborative ideas.
Inspiring others
Meanwhile Gate 21 and iNudgeyou have just presented their progress on the Stronghouse “One stop Shop” at another European session on the financial aspects of energy renovation for single family houses. Four of the largest Danish banks (Nordea, Nykredit, Sydbank, Jydske Bank) and finance institute Forenet Kredit – showed great interest in the Stronghouse approach.They have now started energy renovation dialogues with their customers, provide interest-free green loans and energy audits. However, there is a need for more training – and that is what Stronghouse will contribute.
Motivated by exchanges with iNudgeyou, Vives are now also considering the organization of courses for bank employees on the interpretation of the EPC and how to use this to interact with their clients when discussing loans.
Innovative financing ideas
Besides bank loans, other innovative financing possibilities are popping up across the board and can provide a source of inspiration, certainly in areas challenged by ‘energy poverty’. ‘Hire a Heat Pump’ is such an initiative and requires no direct homeowner investment but a monthly payment. iNudgeyou is analyzing possible customer barriers to using this concept.
We’ll keep you posted! Meanwhile you can subscribe to the Stronghouse Newsletter and follow us on LinkedIn and twitter